A quick and convenient way to find option trading strategies is by using an option strategy screener. An option strategy screener can find you many different types of option trading opportunities based on many things that you are interested in doing such as your market outlook (whether it’s bullish, bearish or neutral) or based on some other type of option trading criteria.
With just a couple of “clicks” of using an option strategy screener, it can quickly find you a qualified list of option trading strategies matching the objectives of your strategy.
An option strategy screener can easily scan for such strategies as the following:
- Bull Call Spreads (see how to create a Bull Call Option Spread to make a 100% return in 30 days)
- Bull Put Spreads
- Bear Call Spreads
- Bear Put Spreads
- Diagonal Spreads
- Calendar Spreads
- Straddles
- Strangles
- Butterfly Spreads
- Iron Condors
- Plus More!
In addition, you can also do scans for more specific things like:
- Find a Strategy to Fit Your Trading Budget
- Level of Implied Volatility (from low to high)
- Options that are I-T-M, A-T-M or O-T-M
- Shorter-Term to Longer-Term Option Expiration Dates
- Certain Price of Underlying Financial Instruments Having Options
- And Much More!
Of course, if you already know how to create option strategies (or want to trade one based on a certain type of financial instrument or on a particular company), you can always go directly to the related option chain and just manually select all those options that make up the strategy you wish to create.
Another way to find option strategies is to use technical analysis. For example, if you have identified an uptrend on a chart you could wait for a pullback to happen and then do any of the following types of option strategies – a bull call spread (a debit spread) or a bull put spread (a credit spread) or even just buy the call option by itself.
An option strategy screener should come complementary with your brokerage trading account once you have signed up with an online broker.
The Importance Of Risk Profiles
Once you have chosen an option strategy to trade, it’s highly recommended that you run a risk profile of it before placing the trade. This will allow you to assess the merits of it to see if it meets your expectations as to your risk-to-reward profile, time frame, and the cost of it if doing a “debit” spread or cash deposited to your brokerage account if doing a “credit” spread, among other things.
By using risk profiles you will be able to clearly see important aspects of your option trading strategy as to:
- Profit and Loss Zones
- Break-Even Points
- The Impact of Time Decay (Theta)
- The Impact of Changes in Implied Volatility (IV)
- Netting of all the Option Greeks
(to learn more about risk profiles click on Analyzing Option Strategies)
Last Thoughts About Finding Option Strategies
With today’s trading tools such as option strategy screeners and risk graph generators that are available to option traders, you are sure to find an option strategy that will meet your own objectives and be able to analyze them to see if they would be worthwhile to trade.
